FINAL TRANSCRIPT. Capstone Mining Corp. Fourth Quarter and Year-End Results

Transcription

1 FINAL TRANSCRIPT Capstone Mining Corp. Fourth Quarter and Year-End Results 1

2 CORPORATE PARTICIPANTS Cindy Burnett Capstone Mining Corp. Vice President, Investor Relations and Communications Capstone Mining Corp. President and Chief Executive Officer Jim Slattery Capstone Mining Corp. Senior Vice President and Chief Financial Officer Capstone Mining Corp. Senior Vice President and Chief Operating Officer Rob Blusson Capstone Mining Corp. Vice President of Finance 2

3 CONFERENCE CALL PARTICIPANTS Matt Murphy UBS Analyst Scotiabank Analyst Stefan Ioannou Haywood Securities Analyst Ralph Profiti Credit Suisse Analyst Sasha Bukacheva BMO Capital Markets Analyst James Hayter Rossport Analyst Cliff Hale-Sanders Cormark Securities Inc. Analyst 3

4 PRESENTATION Operator Good morning, ladies and gentlemen, and welcome to Capstone Mining Corp. Fourth Quarter and Year-End Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for a question. If anyone has any difficulties hearing the conference please press *, 0 for Operator assistance at any time. I would like to remind everyone that this call is being recorded on February 18, I would now like to turn the conference over to Miss Cindy Burnett. Please go ahead. Cindy Burnett Vice President, Investor Relations and Communications, Capstone Mining Corp. Thank you. I d like to welcome everyone on the call today. The news release announcing Capstone s 2014 financial results is available on our website, along with a PowerPoint presentation that contains summary information on the Company and our financial and operating results, as well as webcast slides to accompany our commentary today. With me are, Capstone s President and CEO; Jim Slattery, Senior Vice President and Chief Financial Officer;, Senior Vice President and Chief Operating Officer; and Rob Blusson, Vice President of Finance. I would like to advise you that this call is being recorded for replay through our conference call provider, and is being broadcast live through an Internet webcast system. Comments on the call today will contain forward-looking information. This information by its nature is subject to risks and uncertainties, and actual results may differ materially from the views expressed today. For further information on these risks and uncertainties please see Capstone s relevant filings on SEDAR. And finally, I ll just note that all amounts we will discuss today will be in US dollars unless otherwise specified. Now I ll turn the call over to. President and Chief Executive Officer, Capstone Mining Corp. Thank you, Cindy, and good morning, everybody. Jim will lead off with a review of the financial results for 2014 followed by Gregg, who will provide an update on our operations. We will also update you on our development projects and our corporate activities followed by your questions. I will now turn the call over to Jim. Jim Slattery Senior Vice President and Chief Financial Officer, Capstone Mining Corp. Thanks, Darren. Despite reporting a net loss of $22.4 million for the year, 2014 was actually very good for us, both financially and operationally as we ll talk about further. Operating cash flow before changes in working capital of almost $200 million set a new record for Capstone, a very strong performance considering our realized copper price was only $3.03 per pound in The net loss for 2014 was largely a result of $55.8 million, or $0.15 a share pre-tax, of non-cash write-downs. $36.2 million was attributable to Minto, where an elevated cost 4

5 structure has been particularly affected by a weaker copper price. We also wrote down our Kutcho property earlier this year and recorded a non-cash impairment of available-for-sale securities of approximately $11 million. Of the 2014 full year non-cash charges, $32.3 million, or $0.08 a share pre-tax, was recorded in the fourth quarter. Looking forward to 2015, the questions that we re getting most frequently from investors and analysts are around 1) our sensitivity to falling oil prices and changes in exchange rates, 2) our cash flow and compliance with debt covenants in a weaker copper price environment, and 3) how we will align our 2015 capital budget to financial capacity in a volatile market. I will address the first two and leave the third one to Darren to cover in more detail. Our 2015 cash cost guidance, was based on a diesel price of $3.25 per gallon. Diesel makes up about 9 percent of our site costs at Pinto Valley and 8 percent on a consolidated basis. Pinto Valley, our largest consumer of fuel, budgeted $3.00 per gallon and uses approximately 7 million gallons per year. With current prices just under $2.00 per gallon at Pinto Valley, the savings at that mine alone are in the range of $0.06 a pound on the full year basis. This is only the direct cost at the mine site and does not include the potential savings that we can also expect to realize on other inputs, like transportation and ocean freight, as the effect of falling prices works its way through the system. Turning to foreign exchange. Our guidance was based on the Canadian dollar at $1.18 per US dollar and a Mexican peso of $13.25 per US dollar. A 1 percent change in the value of the Canadian and Mexican currency would affect Minto's 2015 after-tax earnings by about $1.3 million and Cozamin's by about $200,000. We have included a table in the MD&A this year providing detail on our sensitivity to copper prices and operating currencies. Now turning to the second question, we ended the year with $150 million of cash and $276.1 million of total debt. Now, in January we refinanced this with a new four-year revolving credit facility for $500 million with $440 million presently committed. The rate on the new facility is US LIBOR plus 3 percent. We drew approximately $265 million against the new facility, which now represents our only outstanding debt, and have approximately $235 million in additional credit capacity available to us. The covenants on this new facility are a minimum EBITDA to Interest Expense of 2.5:1, a maximum Senior Secured Debt to EBITDA of 3:1, and a maximum Total Debt to EBITDA of 4:1. These last two covenants are calculated net of our cash balance, which leaves us with lots of room currently. We started work on setting up this facility in the fall when it became apparent that the deterioration in the high yield bond market was not going to turn around quickly. We were completing the facility in early January just as the copper market was moving lower, and as a result we and our lenders stress-tested copper prices down to very low levels to ensure that we were all comfortable, even if copper prices remain depressed for an extended period. With our current 2015 spending plan and assuming an average copper price for the full year at around the current levels of $2.60 a pound, we remain comfortably in compliance with all of our covenants. At prices as low as $2.20 per pound we remain comfortably in compliance with our debt service covenants; however, there is some risk of a temporary, and by that I mean no longer than three quarters, technical covenant issue with the senior and total debt coverage covenants at prices below $2.50 a pound. Once we've moved through 2015, which is a year of significant planned capital investment, we come back into compliance with all 5

6 covenants even if price is as low as $2.20. So fundamentally, we are well placed to ride out a period of lower copper prices without changes to our business model. Should copper prices remain below $2.50 for an extended period, however, we do have the flexibility, in addition to the $36 million of discretionary capital as we discussed in our guidance news release, to further manage our financial position. At the same time, we continue to believe it makes sense to term out the debt used to acquire Pinto Valley, aligning the maturity more closely with the extended 12-year mine life. So we're monitoring the high-yield market, and if the appropriate window opens up, we will consider it. With the changes in our revolving credit facility, our existing cash balance, and no significant immediate use of proceeds, our current operations are more than adequately capitalized even at depressed copper prices, well into the future. So now I'll turn the call over to for our operational update. Senior Vice President and Chief Operating Officer, Capstone Mining Corp. Thanks, Jim. Our operations ended 2014 very close to where we expected to be both on production and cost. All three of our mines posted production within 2 percent of their guidance mid-point. Cozamin and Minto both outperformed their cost guidance, and Pinto Valley ended the year at $2.03 a pound, just 1.5 percent above the top end of the guidance. I would like to highlight the cost performance at Pinto Valley in the latter part of the year, which came in at a $1.82 during the fourth quarter and averaged $1.89 for the second half of the year. We have identified further cost reduction opportunities at Pinto Valley and will continue to exploit them systematically. These include improved operational stability in the mill as a result of improvements to maintenance systems, an organizational realignment, and of course we expect to see the benefit of fuel savings as well as savings in oil indexed consumables. While 2015 costs will be affected by the reduced grade in the mine plan, we're working to improve the cost guidance we provided for this operation. We continue to focus on operational continuity at Pinto Valley and remain focused on stabilizing the operation at a throughput of 50,000 tonnes per day. During 2014, the mill frequently operated at a throughput rates above that, with December recording the highest monthly average so far at 51,200 tonnes per day. However, operational reliability continues to be an issue in mill performance, and as a result we still have work to do to sustain that rate and move it up with our focus continuing on systematic preventative and predictive maintenance to reduce the frequency and duration of unplanned downtime. Following the very positive results in December, January wasn't a great month for us with mill throughput averaging in the low 40s. This volatility is primarily due to reliability of the mill, and we are working to improve this through improved execution of our maintenance program in a more systematic application of our predictive maintenance. This will improve availability and production, while at the same time significantly reducing our maintenance costs. The reliability of the tailing pipeline was also one of the main issues in January impacting mill throughput. Replacement of this line was previously budgeted for 2015 and the project is currently in the design phase with completion expected in the third quarter. 6

7 At Cozamin, with the exception of minor grade fluctuations on a quarter-by-quarter basis, we ended the year essentially on plan from a production perspective and did better than our cost guidance on the back of concerted cost reduction efforts at the mine. Going forward, the mine plan calls for lower production due to lower grade ore, with costs per pound rising in In addition, maintaining the underground development targets with existing crews has proven challenging with the new ground support standard implemented in This caused a shortfall in development during the latter half of 2014, and we're working now to make up that shortfall going forward. At Minto, the mine plan required re-sequencing in 2014 due to the delay in receiving permits and licences. However, we closed out the year essentially on production guidance and slightly better on costs due to lower site G&A costs as well as a weaker Canadian dollar. We have yet to receive the required permits at Minto, and Darren will elaborate on our next steps at that operation. I'll now turn the call back over to Darren. Thanks, Gregg. I'll briefly cover where we are with our various growth initiatives, our operations at Minto, and also talk about the flexibility we have in our planned 2015 capital spending should low copper prices continue for an extended period. The budget for 2015 calls for a heavy investment year for us as we open up an additional seven years of mine life at Pinto Valley and have budgeted to strip the high-grade Minto North pit for mining in When we issued our 2015 capital guidance, we indicated that we have identified $36 million of our capital program that can be deferred or cancelled without impacting current operations. This is across our operations and growth projects, and while we have not made any changes to our 2015 budget at this time, we have asked each of our teams to assess what projects can be postponed. The $36 million does not include the pre-stripping of Minto North, which was guided at $23.6 million. If the Minto North water licence is not received in a timely manner and we decide not to strip Minto North in 2015, we would not have to defer much of that $36 million in other capital projects. In the meantime, we're moving forward with the spending for PV2 mine life extension project at Pinto Valley. This includes purchasing additional mining equipment necessary to mine the two additional pushbacks and taking the mine life to 12 years from the initial five years in reserve when we purchased the operation. Starting in 2016, and for the remainder of the PV2 mine plan, capex is expected to average less than $15 million per year. We're advancing two cases towards a pre-feasibility study for PV3, which is considering the 84 percent of the Mineral Resource at Pinto Valley not included in the current mine plan. We are looking at a modest increase of 10 to 15 percent in throughput and extension of mine life as the base case, as well as evaluating a 90,000-tonne-per-day case along with an extended mine life there as well. The studies will be complete in the third quarter, and we expect a decision on which path we choose will come down to the risk adjusted return opposite permitting risk and water availability. When we first acquired Pinto Valley, we envisioned that permitting for the mine life beyond the first 12 years could take in the range of three to five years. We have, however, identified a new area for tailings completely on our patented land, affording us the opportunity 7

8 to cut that permitting time considerably; conceivably making PV3 a low-risk, brownfield, medium-term opportunity for us. Switching over to Minto. As we've said for some time now, we are coming up on a decision point at Minto. Our overall objectives are to maximize the value of that operation to our shareholders, and to manage cash flow in a period of high market volatility and low metal prices. There are two key factors that will influence our decision-making over the next several weeks. The first is the receipt of the water licence so that we can mine the Minto North deposit and fully exploit the underground resources. The second is the current metal price environment and the impact this has on our operating cash flows and capital commitments. As of just last week, it appears less likely that we will receive the necessary water licence by the end of March as previously anticipated. In fact, based on the most recent interaction with the Yukon Water Board, if it is not received as planned, we are not in a position to estimate when those permits will be received. This is due to an additional information request received following the period of public consultation. We first submitted the Phase V/VI project proposal to the Yukon Environmental Socio- Economic Assessment Board back on July 5, For the next 10 months, we responded to four rounds of information requests, and the evaluation report from the Board with a recommendation to proceed was issued in April of The final decision document was issued in June of 2014, following which we submitted our Water Licence application on July 2, We had three rounds of information requests from the Water Board through the latter part of last year, with the Water Board declaring what they call Adequacy, last December. On December 10, 2014, our application went to the public comment period, which ended on January [21 st ] of this year. There were five interveners that commented on our application, and the Yukon Water Board presented us with a fourth information request on February the 6 th of this year, which we responded to on February 16 th. As a result, we do not expect to be in a position to pre-strip the Minto North deposit at the beginning of the second quarter as planned. We will continue to work with the Water Board to secure the required licences as expeditiously as possible, but we will not be making any capital commitments until an acceptable permit is in hand. While copper prices appear to have stopped falling, they remain at levels where the economics of the Minto mine, without the Minto North deposit, are questionable. We are evaluating all options for optimizing the cash flows for Minto in the current climate. It will take us some time before we can provide further clarity and guidance, and our decision will balance the preservation of the value of that operation with a desire to manage our cash flow until such time as final permits are received. At Santo Domingo, we have selected POSCO as our EPC contractor for the project. We ran a competitive process with a significant degree of interest from four major international engineering and construction firms. POSCO was selected based on the quality of its bid, its strong reputation, its willingness to assume a significant portion of the project construction and completion risk, as well as its bid price. Based on a lump sum fixed-price bid covering approximately 70 percent of the project, we are increasingly confident that the total capital costs of the project will come in at or below the previous estimate of $1.7 billion. With that said, the recent decline in metal prices has had an impact on our capacity to generate cash from our operations to support the development of this project. And as a result, 8

9 we are focusing our 2015 spending on permitting, the maintenance of our social licence, and engineering work that will offer the greatest enhancement to the option value of the project. In light of this, at this time we have only awarded POSCO with a Limited Notice to Proceed to the end of Stage-Gate 1 - expected to be completed by the end of the second quarter of this year, when we expect to have received the approval of the EIA and fully validated the scope and cost estimates in the definitive feasibility study. At that point, we will re-assess the project and make a decision on how to proceed for the balance of the year. Our 2015 base case spending is $16.9 million in total expenditures, of which Capstone's share would be 70 percent or $11.8 million, as covered in our guidance news release. In closing, the major milestone for us in the fourth quarter was the continuing progress we made in operating costs at Pinto Valley, and following the end of the quarter the increase in our debt capacity and elimination of the quarterly amortization payments of our debt. Looking forward, for the balance of the year our focus is on continuing to stabilize mill throughput at Pinto Valley, develop the best path forward through Minto, and continue to advance Santo Domingo on a basis that we can afford in the current market conditions. Operator, that concludes our prepared remarks, and we're now ready to take questions from the floor. Q&A Matt Murphy UBS Morning. Just a question on Minto. Can you give a few options? You say all actions are under consideration; can you give a range? I mean, is a full suspension of activity there on the table? Or is it more just managing your mining areas? This is Gregg. Yeah, I think everything you mentioned. I mean, if we don't get the water use licence within the time frame that we had indicated then we don't have enough ore to keep operating until Minto North is stripped, so the conclusion is obvious at that point. You would have to shut down. Matt Murphy Okay. And then just on the Pinto Valley news that you've found a new area for tailings. Is there a capex implication from that option that saves you time? Or do you think you can do that for a comparable capex to expanding the current facility? Well, for an eventual PV3, the current facility wouldn't be adequate. It's limited for a couple of reasons: there's not enough capacity there, but also as you continue to increase the height of it you would have a problem with the rate that you were raising the dam. So we needed to find another location. The other location that we've found we looked at six different locations it actually would have the advantage of reducing our operating costs long term over the current tailings impoundment because it would all be gravity flow, and it would give us more optionality as well because we would be able to use both the new dam and the existing dam. 9

10 Scotiabank Thanks, guys, and congrats on the operating cash costs there at Pinto Valley. Just looking for a little bit more colour, if I could, in terms of the potential timing of some of this capex being deferred, particularly at Pinto Valley and Cozamin. My concern or worry is that it'll be continuously pushed back in the current copper price environment, and maybe not deferred until the fourth quarter. So just wondering if there's any sort of clarity you can provide on the $16.5 million at Pinto and about $6.7 million at Cozamin. Mark, it's Darren here. Listen, at current copper prices we don't have to defer any capital. So that's one, we're not deferring any capital. And most of the capital is back-end loaded to the second half of the year, so we can afford some time to see where copper prices settle in. But as Jim mentioned when he went through his remarks, at current copper prices we wouldn't be deferring any capital at this point. Right, okay. So most of the Pinto Valley capex, I guess of the planned $86 million, even though the shovels I guess you've got to do hydraulic truck, or the trucks are on site, the shovels coming; most of that's still back half loaded? Okay. So none of that PV2 capital is part of that $36 million. The only real capital at PV that we would defer would be the PV3 study. So none of PV2 would be deferred under any situations we ve talked about. Okay. So the $16.5 million is primarily related to that PV3 study? PV3 and other things, but not anything to do with the current PV2 mine plan. Okay. At Minto as well too, you've talked through a number of the options I think Gregg had mentioned, you only have a limited stockpile of ore there. I guess, in your minds, when do you feel you need to make a decision? Because obviously, if you knew that you weren't going to get that permit for another like call it two years, the decision, I think, would be obvious to stop the operations today and not process that stockpiled material because you're doing it close to breakeven or potentially at a small operating loss. What targets have you set in terms of your minds for when you would need to hear back? Well look, as I've said, we've just received a response and responded back with what we feel is an adequate response to the latest submission to the Water Board. So we need to first understand how they accept that response and what they do upon that. If they want further information that's going to take us several months to compile, you're right. We're down to processing stockpiles, and we need to understand if we can make that if that's the best use of our capital and what kind of cash will that generate. And that doesn't take us won't take us that long to do once we get a response back from the Water Board. But if it's going to be several months, we definitely have to have a hard look at the operation. 10

11 Okay. That sort of follows up, to my last question before maybe I'll jump to the end of the queue afterwards. Can you provide any sort of colour on those information requests? Are they sort of standard ones that maybe you've already done a bunch of the sort of field work or whatever work's required to respond to that? Or is it something that's more detailed? Yeah, look, all of this last information requests were items related to a small dam that we put at the mouth of the pit to increase the tailings capacity, and most of that information had already been developed subsequent to the application for the water use licence amendment, so we simply provided the information that we had. There was one item that they asked for that couldn't be done until you had the final design of the dam and we wouldn't it was something that you would normally do as you go through the design, and that would be submitted to EMR before you could build a dam. So we responded accordingly, so we'll have to see what the Water Board's view is of that. Stefan Ioannou Haywood Securities Great. Thanks very much, guys. Just a couple of questions. At Pinto Valley, I know I think in the capex budget this year you ve mentioned there's about $8 million for the PV3 study. I'm just wondering how much did you guys actually spend in 2014 with looking at the tailing sites and other things associated with the PV3? Yeah, the $8 million is not just for the study, it's that's assuming that we get fairly advanced down the permitting path as well. I'm not sure if that answers your question? Jim Slattery 2014 on PV3 was minimal. Stefan Ioannou Minimal, okay, fair enough. And how are things going there with the whole labour contract negotiations? I know the contract expired back last June, and it sounded like discussions were ongoing and ongoing. Has there been any progress there? Yes, very good progress made there. As we commented on previous calls, the union is negotiating several other contracts at the same time as ours, and we're one of the smaller ones. So we're just following kind of at the direction of the union in terms of negotiations, but everything has been going very well. We're very satisfied and obviously due to those sensitivities we can't comment too much on negotiations. Stefan Ioannou Sure, fair enough. And maybe just one more and then I'll let some other guys go. You did some exploration drilling at Providencia in Q4. Have you guys had any results from that back yet? Or are we still waiting? No, we haven't received any results yet. We're still waiting for those. Ralph Profiti Credit Suisse Thanks, everyone, for taking my question. Just one for me. Darren or Gregg, you talked about equipment availability at Pinto Valley, and if I could just go a little bit further into 11

12 the poorer January than expected. Are we seeing issues with conveyor systems and cyclone pumps that were there in the past? Or are you seeing something new? For the most part, I would say it s issues that we ve seen on one part of the mill in the past, and we re seeing it work its way through the six grinding circuits. The problem we re having with the maintenance there is, I want to reiterate that it s not a systemic problem there that s going to prevent us from reaching the production levels that we ve budgeted. We ve just got a problem in our maintenance systems and maintenance processes. Sasha Bukacheva BMO Capital Markets Thank you. Good morning, everyone. So I thought water boarding was considered torture in certain countries. So what seems to be the issue there? And are there any alternatives in terms of what you could do to change your operating footprint to expedite receipt of this water licence? Yes, I suppose that option is there. We don t want to do that because we think it would forfeit a lot of future value there. I guess we could drop building the tailings dam, which we may or may not need. It provides a lot of optionality, but that s not the position we want to take. Minto doesn t deliver a lot of our production and a lot of our value, so we re not going to alter our long-term plans at Minto just to get a quick fix licence. We re going to follow the process, make sure that we get what we need, and whatever time that takes, we re fine with it. Sasha Bukacheva Okay. And just maybe to get a bit of a better sense, what is exactly the issue that they have? Is that stability? Or the amount of water in the dam? Can you provide a little bit more colour? What are their concerns? I wouldn t characterize it as an issue. They re asking for more information. They re asking for information that you would normally not provide until you got to the design phase of a tailings dam, and so we don t have that information completed yet; it would take us some time to do that. So if they re going to demand that they want that information now, we would assume the water permit would be delayed by several months. And I suspect some of this, obviously, because it is a tailings dam, is coming albeit very small is coming from obviously the scrutiny around Mount Polley. Sasha Bukacheva Yeah, makes sense, fair enough. And then separately, just to go back to Pinto Valley, Gregg, what s because you know those maintenance issues obviously are not ideal - in a perfect world, what changes would you implement to stabilize things in the plant? I guess better and more consistent predictive maintenance. I think a lot of it comes down to that is what they re you know, the frequency that they re collecting that information. Who s analyzing it, what they re doing with the information after they get it. So we re having a lot of surprises that should not, in a well-maintained plant, be surprises. 12

13 Sasha Bukacheva Okay. So basically it really relates to people. So is it like the quantity of people? Or the quality of their information management? I think it s probably both. There s some cracks that we re, you know, have been chronically short on since start-up there. So that s part of it. And I think part of it is things that maybe they re trying to do in-house that would logically, could be much better done by a specialist from the outside. I mean typically you re predictive maintenance; there s a lot of companies that specialize in predictive maintenance, and that s all they do. They come in and they do the root and they take it back and they analyze the information and they send you back they basically send you back a heat map, so you don t have surprises. Sasha Bukacheva Is that your plan, then, to engage one of those consultants? Yeah, absolutely. We ve already engaged a company to do that. Sasha Bukacheva Okay. And so when do you what sort of did you set any targets for them? Like when would you expect to see results? Well, working through some of the issues, it takes time. I would expect to start seeing results pretty quickly, but I think it ll start to snowball, probably in a couple of quarters, we should see some dramatic improvements. Sasha Bukacheva Okay. Thank you very much. That s it for me. Thank you. James Hayter Rossport Hi, guys. Just on the carrying costs of Santo Domingo this year, have you got any estimates you could give us? On a similar vein, if you do put Minto on care and maintenance, do you have any estimates as to how much that may cost? Jim Slattery In our guidance press release, we provided our total cost estimates for Santo Domingo, so that s what we re anticipating spending and now, there is a possibility that if markets improve, and depending on the results of the work that s done over the course of the next four to five months, that we may increase that spending to as much as $33 million on a 100 percent basis - but that is the envelope. If you re asking what it would cost just to strip it down and just to keep it, we haven t that analysis isn t all that refined. It would be a few million dollars, but that s not something that we re contemplating at this time. James Hayter Okay, thanks for that - that was what I was after. And if Minto did go on care and maintenance, is there any estimates for how much that may cost? 13

14 We haven t done that analysis yet, but I wouldn t expect it to be too different than what s already happening there, because obviously we re producing at or above the breakeven copper price right now. Cliff Hale-Sanders Cormark Securities Inc. Hi, good morning, everyone. Just two questions. I wanted to follow up on the questions regarding Minto and the shutdown care and maintenance cost. From the point of view of how assuming that you did shut it down some time in the next quarter - how quickly could you turn it back on in, say 2016, because the outlook does look much improved there. Is that going to be a significant cost? I know we ve had this mine up and down a little bit in the past. And my second question really relates to comments you have in your longer-term corporate strategy of five mines and a project. I m wondering why one, you wanted to get so definitive on your outlook, and what is driving that strategy commentary? Well, first question, Cliff, was we would obviously keep if we did contemplate a shutdown of Minto, we would obviously keep the care and maintenance as such that it would be able to come back as quickly as possible. We obviously are very optimistic about Minto North, and as you said, copper prices expect to recover. When that happens, we re not sure, whether it s this year or next year. But we would be ready to mobilize as quickly as possible and would design a program that would do that. I m not sure I follow your second question. Cliff Hale-Sanders You said five mines. I m just wondering why you wanted to be so specific. Obviously, mining companies, generically, want to grow volume and production in certain jurisdictions. Any colour for why you wanted to be so definitive? Jim Slattery I don t think it s a question it s directional but I mean, what it s trying to do is say that we re not trying to be the biggest mining company ever. We re not going to be accumulating a massive, significant number of properties. Our goal is to be focused, to have a finite number of properties that we manage exceptionally well in jurisdictions that we described. So it s really to try to give you more of a picture as to where we re going to go, what we re trying to be. That we re not going to be looking after 10,000-tonne-a-year producing properties - that we ll be looking for something somewhat larger than that. We re not trying to become a massive, global operation with 20 operations and a huge infrastructure. What we d like to do is be able to manage that type of production with an office and an SG&A bill which is not significantly larger than what we have today. You'll note that for 2014, our SG&A was pretty much the same as it was in 2013, notwithstanding doubling our production. And that's the kind of economies that we're trying to create over the course of the next five to 10 years. The purpose was really just to give you a little bit more specificity on where we're trying to head, what the vision looks like, and what kind of company we want to be. 14

15 Yeah, thanks. Just two quick follow-up questions. Not to belabour Minto here, but, Jim or Gregg, can you give us a sense of how many tonnes are left in the stockpile that are, or were, economic at year-end once you took the inventory write-down. Well, our stockpile and the currently permitted underground ore would take us through sometime in September at the current milling rate. Okay, I was trying to come back then, because even with the underground I guess you cannot does that there's mining through to the end of the currently permitted underground and not, increasing rates from underground there once the stockpile's done? Yeah. Well, it wouldn't make a lot of sense to increase the underground because we don't have that much underground ore currently permitted. So the problem; you need the underground together with the stockpiles because we don't have that many operational faces. So you can't produce enough ore out of underground there with what we currently have to feed the mill. You have to have the stockpiles to go with it. Okay. So it's really the volume of the stockpile that's the limiting factor through the end of September. Yes, that is correct, Mark. There would actually be more underground ore there, but with no stockpiles left to blend it with you couldn't continue to operate at full capacity in the mill. Right. And switching gears just to Santo Domingo, it looks where you're making a lot of progress towards that first stage-gate. The 70 percent that's under the fixed price bid, or contemplated to be under that bid, the remaining 30 percent, is that just something that's separate in the scope? We're just trying to get a sense of maybe what that 30 percent is, if that's infrastructure that may be higher risk for the typical capital blowouts that we've seen over the last number of years, or if that's just things that typically fall outside of their scope. Yeah, okay. No, I think probably could characterize the 30 percent that stays in our house as most of the lower risk items; it's purchasing the mine fleet is a big part of it, the prestripping is part of it, and of course the owner's cost. I'd say the only item in there that's got some risk attached to it would be the construction of the tailings dam. But that's, in the scheme of things, is less than $25 million. Right. And then on mining per tonne or material movement costs as opposed to anything else? I guess the risk there would be more material movement and handling costs than anything else? Yeah. Well, I guess there's always geotechnical risk on where the bedrock's at and that. But I've said typically on those things the biggest risk is always just geotechnical. But like I 15

16 say, it's not a big dollar item. The other item that's in that 30 percent is the road bypass, but that's already been fairly--it's already engineered out to a fairly high level of detail. So I don't really view that as a big risk. Right, great. Thank you for the colour. And yeah, keep up the good work. Operator Thank you. As there are no further questions, I will turn the call back over to Mr.. Thank you, Operator, and thank you, everybody, for participating on our call today. And as always, if you have further follow-up questions we'd be happy to answer those here, so just contact us directly. Thank you very much, and have a great day. ***** 16